GAC Auditing Principles & Procedures 2 — Questions and Answers
Question 1: Under GAGAS, which type of audit opinion is issued when the auditor cannot obtain sufficient appropriate evidence?
- Adverse opinion
- Disclaimer of opinion (Correct answer)
- Qualified opinion
- Unmodified opinion
Correct answer: Disclaimer of opinion
A disclaimer of opinion is issued when the auditor is unable to obtain sufficient appropriate evidence to form an opinion on the financial statements.
Question 2: Which GASB standard governs the financial reporting of state and local governments and is foundational to governmental audits?
- GASB Statement No. 34 (Correct answer)
- GASB Statement No. 14
- GASB Statement No. 45
- GASB Statement No. 72
Correct answer: GASB Statement No. 34
GASB Statement No. 34 established the current model for state and local government financial reporting, including government-wide and fund financial statements.
Question 3: During a performance audit, an auditor identifies a condition that deviates from a criterion. What must the auditor next determine?
- The corrective action plan
- The cause of the deviation (Correct answer)
- The auditee's response timeline
- The report distribution list
Correct answer: The cause of the deviation
After identifying a condition, the auditor must determine the cause to fully develop a finding under the condition-criteria-cause-effect framework.
Question 4: An auditor discovers that a government agency failed to deposit tax collections within the required timeframe. This finding relates to which audit objective?
- Economy
- Efficiency
- Compliance (Correct answer)
- Effectiveness
Correct answer: Compliance
Failure to follow required deposit timelines is a noncompliance finding because it violates a legal or regulatory requirement.
Question 5: What is the primary purpose of obtaining a management representation letter during a governmental audit?
- To replace substantive audit procedures
- To confirm oral representations made by management in writing (Correct answer)
- To document the auditor's risk assessment
- To satisfy FOIA disclosure requirements
Correct answer: To confirm oral representations made by management in writing
A management representation letter formalizes in writing the significant oral representations made by management, providing documented evidence of those assertions.
Question 6: In a Single Audit, the auditor must test major federal programs for compliance with requirements in which primary reference document?
- GAO Yellow Book
- OMB Compliance Supplement (Correct answer)
- COSO Framework
- AICPA Audit Guide
Correct answer: OMB Compliance Supplement
The OMB Compliance Supplement identifies the compliance requirements applicable to each major federal program that auditors must test.
Question 7: Which concept requires governmental auditors to document audit evidence in sufficient detail to allow an experienced auditor with no connection to the audit to understand the procedures performed?
- Professional skepticism
- Audit trail documentation
- Sufficient documentation (Correct answer)
- Workpaper indexing
Correct answer: Sufficient documentation
GAGAS requires sufficient documentation so that an experienced auditor with no previous connection to the audit can understand the nature, timing, and extent of work performed.
GAC Auditing Principles & Procedures 2
Under GAGAS, which type of audit opinion is issued when the auditor cannot obtain sufficient appropriate evidence?